New housing units started in the US posted their biggest decline in 27 years in February while building permits dropped to their lowest level on record, new data has shown.
The shock fall suggests the US’ beleaguered real estate sector has yet to recover from its deepest slump in 80 years.
Groundbreaking on new construction dropped 22.5 per cent last month to an annual rate of 479,000 units, according to Commerce Department data – just above a record low set in April 2009 and way below the estimates of economists.
Societe Generale economist Brian Jones said the reduction showed that “residential construction activity is going absolutely nowhere”.
“The February pullback exceeded expectations and the weakness in single-family construction caught us all by surprise,” he said.
“The detail of the report revealed widespread weakness, with all regions of the country posting reduced activity in February.”
Multi-family unit starts fell by a startling 46 per cent to 104,000, and core single-family starts dropped by 12 per cent to 375,000.
January's figure was revised up to 618,000 units from 596,000. But that did not change the tenor of the report, which confirmed that the sector is failing to recover despite interest rates near record lows.
Building permits, a hint of future construction demand, fell to a record low of 517,000 units from a revised 563,000, and were down by about 20 per cent from levels seen in February 2010.
Housing was at the epicenter of the financial crisis of 2007-2009.
One key impediment to the sector's recovery is a vast backlog of unsold inventory, while a shaky job market has also made consumers reluctant to embark on any major new financial commitments.
Making matters worse, a glut of foreclosures, stalled in recent months by revelations of improper loan documentation, is depressing the market.